New York Times: G-20 Pledge Is Just Talk

Leaders of the top 20 economies who met this week pledged to do more to increase growth, back a European fiscal union, and support financial stability.

They used the right words. The problem is that they are just words.

Based on past experience, all the talk is unlikely to lead real action, predicts The New York Times in an editorial.

G-20 leaders correctly focused on the eurozone crisis, which is clearly the largest threat to the global economy. "Under current policies, the eurozone and the global economy have been put at high risk," the Times states.

Led by Germany, the response to the crisis has been austerity and piecemeal rescue plans. German Chancellor Angela Merkel has continued to insist that troubled eurozone countries slash their debt even though that policy has proven to be a failure. Germany also has blocked proposals to issue common euro bonds and allow the European Central Bank to buy bonds directly.

As borrowing costs for Spain and Italy increase and the crisis worsens, Germany might change its stance, the Times says. Worsening conditions open the door for world leaders to press Merkel to soften her position and support stronger and more flexible bailout support.

On the other hand, she might not be swayed.

"She has repeatedly insisted on austerity for hard-pressed countries, even when it has been a demonstrable failure," the Times states. "And, while she has correctly asserted that more aid on better terms should be accompanied by greater European unity, the lack of unity appears to be an excuse to delay steps to ensure that adequate aid is available on workable terms."

Although Merkel says she supports great fiscal unity, that goal faces large obstacles, including skepticism of Germany's public, Reuters reports. She has yet to outline her how or when greater unity will come.

Europeans meet late this month in another attempt to address the crisis.

"We know the expectations for the EU summit are high," says a Merkel aide, according to Reuters. "We need to deliver something. But in reality many countries have still not come to grips with the idea of moving towards greater fiscal integration. It's going to be very hard to deliver the big announcement."